Recent Posts and Categories

2015: The Last Christmas in America

OWoN: This will be Santa's last Debt Fueled call in America. Sorry but, for many this Christmas will be lousy at best in terms of spending and those to follow will be even worse without a change in direction. Perhaps in days ahead a warm smile, coffee and time will mean more than money that is just not there. If not there will be an implosion for a nation who funds only War and a fat Pentagon, while more intelligent nations like China fund and expand trade, real relationships. Sustainable wealth creation. Once the new monetary systems come in, the game is up for Washington.

The game of enabling more debt by lowering interest rates and loosening lending standards is coming to an end.

If we define Christmas as consumer spending going up while earnings are going down, 2015 will be the last Christmas in America for a long time to come. In broad brush, Christmas (along with all other consumer spending) has been funded by financialization, i.e. debt and leverage, not by increased earnings.

The primary financial trick that's propped up the "recovery" for seven years is piling more debt on stagnating incomes. How does this magic work? Lower interest rates.

In a healthy economy, households earn more money (after adjusting for inflation, a.k.a. loss of purchasing power), and the increased earnings enable households to save, spend and borrow more.

In an unhealthy, doomed-to-implode economy, earnings are declining, and central banks enable more borrowing by lowering interest rates to zero and loosening lending standards so anyone who can fog a mirror can buy a new pickup truck with a subprime auto loan.

The problem with financialization is that it eventually runs out of oxygen. As earnings decline, eventually there's no more income to support more debt. And once debt stops expanding, the economy doesn't just stagnate, it implodes, because the entire ramshackle con game of financialization requires a steady increase in debt and leverage to keep from crashing.

The trickery of substituting financialization for earned income--the trickery that fueled the last seven years of "recovery"--is exhausted.

The incomes of even the most educated workers are going nowhere, while the earnings of the bottom 90% are sliding: